The filing for Chapter 11 bankruptcy by the Roman Catholic Diocese of Camden this month was unavoidable.
Its inevitability could almost be seen in the 2019 New Jersey law that opened a two-year window for filing claims of sexual abuse against the diocese no matter how long ago the alleged action. That erased the previously applied statute of limitations for such claims. Critics of the law at the time said it would unleash a wave of lawsuits that may bankrupt nonprofit and charitable organizations, eliminating the services they provide to communities.
The diocese tried to handle the claims on its own, establishing a victim compensation fund that had decided 104 of 184 claims and paid out $8.1 million to 71 victims. But whatever chance that approach alone would be enough evaporated in the pandemic.
Government restrictions on attendance at houses of worship have decimated offertory collections at religious institutions of all kinds. A much larger Long Island diocese facing similar circumstances in New York filed for bankruptcy the same day as its Camden counterpart. It said such offerings are about 40% of its annual revenue. More than 20 dioceses nationwide have entered bankruptcy in large part to handle claims of sexual abuse.
The lawsuits against the Camden diocese probably will be gathered under the supervision of federal bankruptcy court, which will determine diocese liabilities and financial assets. Claimants may be considered creditors in the bankruptcy case who are eligible for part of a settlement fund negotiated under the oversight of the bankruptcy court.
An attorney who has represented sexual abuse victims in New Jersey and nationwide, Michael Pfau, told NJ Advance Media, “The bankruptcy simply pauses the pending lawsuits against the diocese so that a bankruptcy judge can marshal its assets and insurance and then decide a fair way to compensate abuse survivors from those assets.”
Legal experts say this is likely to result in some claimants receiving smaller financial settlements than they might have been awarded in a jury trial, while other claimants could receive more from the bankruptcy settlement than from a trial.
A fuller and fairer resolution of the claims motivates the church as well. Bishop John O. Barres, of the Diocese of Rockville Centre on Long Island, said, “Our goal is to make sure that all clergy sexual abuse survivors, and not just a few who were first to file lawsuits, are afforded just and equitable compensation.”
Consolidation of claims through a bankruptcy proceeding is a standard approach under U.S. law for corporations and nonprofits seeking to survive a sudden increase in liabilities. For example, the Boy Scouts of America filed for federal bankruptcy earlier this year in response to a deluge of sexual-abuse lawsuits.
The Catholic Church didn’t do enough to prevent widespread abuse by its officials nor enough to bring abusers to justice — instead it often protected them.
But the church also does a lot of good for society and for the nearly half a million Catholics in 62 parishes in South Jersey.
The bankruptcy proceedings should settle the abuse claims in a way that allows the church to survive. To be sure of that, though, church officials must root out sex abuse and adopt the policies and practices already proven in other institutions to minimize the despicable preying on children by adults.